Correlation Between S A P and Applovin Corp
Can any of the company-specific risk be diversified away by investing in both S A P and Applovin Corp at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining S A P and Applovin Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE ADR and Applovin Corp, you can compare the effects of market volatilities on S A P and Applovin Corp and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in S A P with a short position of Applovin Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Applovin Corp.
Diversification Opportunities for S A P and Applovin Corp
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SAP and Applovin is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and Applovin Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applovin Corp and S A P is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SAP SE ADR are associated (or correlated) with Applovin Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applovin Corp has no effect on the direction of S A P i.e., S A P and Applovin Corp go up and down completely randomly.
Pair Corralation between S A P and Applovin Corp
Considering the 90-day investment horizon SAP SE ADR is expected to under-perform the Applovin Corp. But the stock apears to be less risky and, when comparing its historical volatility, SAP SE ADR is 7.72 times less risky than Applovin Corp. The stock trades about -0.09 of its potential returns per unit of risk. The Applovin Corp is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 16,619 in Applovin Corp on August 28, 2024 and sell it today you would earn a total of 15,340 from holding Applovin Corp or generate 92.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAP SE ADR vs. Applovin Corp
Performance |
| Timeline |
| SAP SE ADR |
| Applovin Corp |
S A P and Applovin Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and Applovin Corp
The main advantage of trading using opposite S A P and Applovin Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, Applovin Corp can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Applovin Corp will offset losses from the drop in Applovin Corp's long position.The idea behind SAP SE ADR and Applovin Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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